Sat 3/24/12. Cycle low. Last blow.

(Update Mon 3/26/2012 9:35AM EST)
SPX is testing the 1407 area, but it was done on a gap up, so I'll risk losing my meager profits by raising my stop to 1414 in line with old System rules on gaps near s/r. The odds have increased that 1387 was a multi-week bottom, but one more drop to 1370-1380 as part of a 3-3-3 or 3-3-5 is still very possible given the technical setup. IMHO, Ben Bernanke's comments this morning about unemployment not being structural and about more economic growth needed to drive hiring makes me think he has more easing in mind to drive down unemployment, and the market probably sees it that way too even though that doesn't preclude another small SPX dip. Still, I am not convinced the Fed or EU will do anything more than minor actions and jawboning before the election and with oil heading into its summer highs, so things should get dicey as the easy money winds down in April/May and ends in June/July. Good luck.
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I'm expecting an imminent cycle low. It is possible that Friday's 1387 was the low, but I'm expecting a test of the 20dSMA which is currently at 1381 and rising, because 3-day candle breaks usually do so just like we did in early March. Also, there are uptrend lines crossing 1382 +/- early in the week and 1371 +/- late in the week. Given those trend lines, the 20dSMA, the 3-day candle break, the typical 50-62% retracement zone for 1340-->1414 and the recent breakout above the old 1371 high, it is highly likely that SPX will bounce from 1370-1380.

That covers the near-term target low. What about the next target high? There are a cluster of trend/channel lines crossing 1430-1460 in the first half April lining up with the last hoorah in 2008 to SPX 1440 before the financial crash. Also, if Tony Caldaro is correct in calling 1340-->1414 wave 1 of 5 of 3 from 1075, then Fib targets from a 1367-1387 low next week reside in the vicinity of 1440-1460 and 1500-1515 for the conclusion of wave 3 from 1075. My technicals line up with Tony's count except I am leaning towards the conclusion of a wave C (not a wave 3) as part of a larger triangle or irregular flat. The 2 counts won't diverge for 2-3+ months anyway. My spending cycle tool is projecting a significant SPX top around April 9-16 or June 1+/-. The effects of LTRO and Operation Twist are winding down but still in play until May/June. So, after the current low plays out imminently, I am expecting SPX to rally through the first week or two in April likely to 1440-1450 but possibly to 1500 then fall 5-10% to the 1340-1380 support zone with previous degree wave 4s. After that, a lot depends on sentiment and the strength of the bounce, but I expect June 1+/- to be a significant high whether it's a lower high below 1440 or higher high to 1500+.

I am fully reloaded short again with stop lowered to 1407.25 after opening a position at 1406 and taking partial profits at 1390. I plan to open a long position on a 4-hour candle breakout (currently 1407 but will start falling from 1399 if SPX drops on Monday).

Regarding my System work, I am about to scrap my plans for a pure scoring system because I can't find the magic formula. I did try the same thing a few years ago but thought my new knowledge and System work over the last couple years could get me over the hump. Not. So, I am considering a hybrid System that adds simple scoring to the indicators I am already using while still using hourly candles and reversal indicators for entries and exits within a handful of simple rules. Currently, those rules would suggest a neutral bias because 3-day candle support has been broken but the moving averages and price are aligned upward, so short and long trades are warranted on 4-hourly candle breaks until SPX breaks out above 1414 or turns the moving averages down. Anyway, I keep plodding along. Have a good weekend and good luck.